Integrated Solutions for Optimal Health System PBM Performance



By: Michael Medel

If you’re a health system, you can no longer afford to silo drug management. Effective Pharmacy Benefit Management (PBM) engagement involves integrating the pharmacy resources that are available to the system that will flatten the cost-increase trend line and improve patient outcomes. A truly integrated pharmacy benefits solution gives health systems an advantage over traditional PBM models because they interact with every step in the patient journey—from administering the initial medication reconciliation review, to providing aspects of the benefit, to purchasing, dispensing and providing various types of patient follow-up.

When you consider PBM engagement in your health system, what matters most? The answer to that question will likely vary based on who is addressing the question. From a Human Resource  (HR) perspective, HR administrators are most interested in the employee health plan. They have both costs and employee satisfaction to think about. The pharmacy division places value on network access which improves prescription volume and leverages purchasing advantages, while allowing the clinical pharmacists to focus on appropriate, cost-effective care for their patients. The C-Suite at a health system looks at the entire enterprise – where satisfaction, volume and risk management are critical components to enterprise success. Risk management arrangements with the system’s health plan partners rank high on the priority list for hospital leaders. As more health plans build risk relationships with health systems, the ability for system pharmacists to provide services that improve quality and lower costs is a key component in the overall risk relationship. Part of these services should be pharmacy benefit management functions which have traditionally resided in the health plan.  It is very common for the PBM business model to be in direct conflict with a health system’s risk strategies, which is why a health system’s pharmacy department must take a leadership role in pharmacy benefits management for their own employees and their risk partners.

Before a health system can deploy an integrated risk strategy, they must understand their current PBM relationship.  There are three basic PBM scenarios in which a health system may find themselves:

  • Traditional (Standard): Your PBM takes on the responsibility of providing the pharmacy benefit with no (or very little) input from the system, and it affords almost no flexibility.
  • Shared PBM (Custom/Semi-custom): Your PBM vendor allows some opportunity to customize – like adding your system dispensing capabilities (e.g., retail, specialty or home delivery pharmacy) or limited clinical customization (as long as there is no impact on pharmaceutical manufacturer rebates), yet it is still more of a standard PBM.
  • Fully Integrated (Custom): You have the freedom to design your drug plan based on your health system and member needs, and you can use the PBM for the services you do not wish to provide (e.g. claims processing).

Having a fully integrated PBM does not imply that you will process your own claims and/or negotiate your own network agreements. PBM partner is still needed for operational tasks.

Untapped Resource: Clinical Pharmacy

As a health system, you may have an untapped resource in your clinical pharmacists.  Integrating these valuable resources into your PBM strategy has huge advantages:

  • Your health system’s pharmacy department has direct patient contact. Clinical pharmacists may be an underutilized tool that has influence over the prescriber and may even have the ability to make prescription order modifications that not only benefit the patient but also help flatten your health system’s cost trend line.
  • Health system pharmacists can create formularies and can lead a system-specific custom formulary process.
  • Health system pharmacists have direct access to the electronic health records.
  • The health system pharmacist and pharmacy department has patient interaction from hospital bed to home.

As a health system, your goal should be to provide a fully-integrated drug management solution that is seamless to patients, provides meaningful cost savings, increases pharmacy revenue and improves patient outcomes.

How do you go about accomplishing this with your existing PBM?  Below are a few steps that can be taken to better understand your current environment.

  1. Learn what your current PBM allows. Often health systems think their PBMs are flexible, customizable, but there’s often wording in the contract that applies conditions that take away flexibility (e.g., “If you do not follow all PBM clinical programs, you will lose rebates.”). You may be at a point in your contract to negotiate new terms. Read the entire contract carefully or find someone that has recent experience with PBM contracting to help you.  Often there are multiple areas of a contract that describe what is allowed and what is not.  You must be sure to address each, so you can be assured the greatest flexibility. Maybe it’s time to undergo a PBM procurement.  This process can make certain all your needs are met because PBM’s are much more willing to give up some control when they are pitted against their competitors.  This process also affords you contracting leverage.
  2. Collaborate internally and externally. Human Resources and the Pharmacy Department should have a strong relationship and bring the ideas for integrated pharmacy care to their C-Suite leaders as a cohesive team. The C-Suite leadership has the ability to approve the idea from which a roadmap could be developed The roadmap should be constructed in collaboration with your external stakeholders (i.e., PBM and health plan) to assure each stakeholder understands their role.
  3. Create a roadmap. Devise a three-to-five-year plan that spells out what you can do immediately and the steps necessary to accomplish your desired destination of integrated pharmacy management.

To get started:

  1. Take an inventory. What do you have? What can you do today? Can you provide clinical services? Can you provide specialty pharmacy?
  2. Do the analytics to determine ROI. The use of data is key. Claims data from the drug plan as well as the medical plan can help you understand the value of many potential interventions (e.g. formulary design, clinical program management, network pricing changes, site of service opportunities, etc)  If this is not an area of expertise for your data and analytics department, find a partner that could help you.  PSG utilizes data and analytics to cut waste, manage cost trends, and ensure proper utilization management of drug plans and would be a valuable resource for you. This level of expertise can effectively improve clinical, financial, and operational PBM performance.
  3. Determine what’s missing. Do you want to incorporate home delivery services? Expand specialty pharmacy? Each program and roadmap will look different depending on the ultimate health system goals.

Understanding your health system pharmacy strengths and transforming these strengths into an overall integrated model is not impossible.  You will need some specialized expertise from inside and outside your system.  The integration of pharmacy and medical claims data is crucial to the construction of one coordinated approach that interacts with patients from end to end. With the spotlight on specialty pharmacy and its growing cost, it is time for health systems to transform their PBM strategy into fully integrated systems that move past the traditional, volume-focused approach and deliver true, value-driven solutions. PSG can support health systems in this evolution – from diagnosing the current state, to creating and acting on a strategic roadmap, to measuring your success.

PSG’s Sr. VP and Health Systems Practice Leader, Mike Medel recently hosted a webinar addressing many of the above concepts and recommendations. To view the recording, click here.

Michael can be reached at: [email protected] or at 972-624-7744.



Mike’s background includes helping health systems leverage their pharmacy programs to drive revenue, produce employee plan savings, and improve risk arrangements with payers.